Souring renewables investment outlook extends life of coal generators

Investors are expressing a souring outlook for renewables in the Australian energy market, casting doubt on the timeline for achieving ambitious clean energy targets. A recent survey of 140 respondents found that 77% believe the investment landscape has worsened over the past year, citing transmission bottlenecks, planning delays, grid connection issues, and negative pricing as key concerns.

Just 8% of respondents are optimistic about meeting the 82% renewable electricity target by 2030. The Australia Energy Market Operator (AEMO) reported that projects are now taking 30% longer to become operational, taking 18 months on average instead of 14. The latest 2026 ISP predicts that over 5 GW of coal-fired capacity will close by 2029, with a projected loss of 15 GW by 2035, primarily in Victoria and NSW.

With electricity demand set to surge due to data centers, population growth, electrification of vehicles, and increased water desalination, completely eliminating 15 GW of baseload non-renewable generation without any replacement is deemed unrealistic and could lead to energy shortages. Queensland recently extended the lifespan of its coal power stations by at least a decade, and NSW and Victorian policymakers are now grappling with the physics of the situation.

AEMO warns that Australia's east coast could face an acute supply deficit if scheduled coal retirements occur as planned, particularly in NSW, where only 1GW of wind farms have started construction since 2020. Origin Energy, owner of NSW's largest coal generator, Eraring, has warned that rising costs and low wholesale prices make wind investment unfeasible without significant subsidies.

The NSW government is actively considering extending the life of its coal-fired generators, as coal currently accounts for 70% of the state's electricity generation. Victoria and South Australia may experience supply shortages starting July 2028 due to the upcoming closure of Yallourn power station, which provides nearly 25% of Victoria's generation.

With Victoria already relying heavily on coal for 61% of its electricity generation in the last quarter, policymakers are acknowledging that replacing baseload coal with intermittent, weather-dependent sources is extremely challenging. The Victorian Coalition has pledged not to force early coal plant closures if they win the upcoming election.

However, the 82% renewable energy target by 2030, once seen as achievable, now appears highly unrealistic in light of the rapid growth of data centers and other electricity-demand drivers. The author argues that a more balanced approach, emulating China's energy strategy of building capacity across various sources, would be more prudent.